Concurrent Credit Portfolio Losses
We consider the problem of concurrent portfolio losses in two non-overlapping credit portfolios. In order to explore the full statistical dependence structure of such portfolio losses, we estimate their empirical pairwise copulas. Instead of a Gaussian dependence, we typically find a strong asymmetry in the copulas. Concurrent large portfolio losses are much more likely than small ones. Studying the dependences of these losses as a function of portfolio size, we moreover reveal that not only large portfolios of thousands of contracts, but also medium-sized and small ones with only a few dozens of contracts exhibit notable portfolio loss correlations. Anticipated idiosyncratic effects turn out to be negligible. These are troublesome insights not only for investors in structured fixed-income products, but particularly for the stability of the financial sector.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
Robust Bernoulli mixture models for credit portfolio risk
This paper presents comparison results and establishes risk bounds for credit portfolios within classes of Bernoulli mixture models, assuming conditionally independent defaults that are stochastically increasing with a c…
The Climate Extended Risk Model (CERM)
This paper addresses estimates of climate risk embedded within a bank credit portfolio. The proposed Climate Extended Risk Model (CERM) adapts well known credit risk models and makes it possible to calculate incremental …
modelPortfolio credit risk with Archimedean copulas: asymptotic analysis and efficient simulation
In this paper, we study large losses arising from defaults of a credit portfolio. We assume that the portfolio dependence structure is modelled by the Archimedean copula family as opposed to the widely used Gaussian copu…
Dependent Defaults and Losses with Factor Copula Models
We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constr…
The two defaults scenario for stressing credit portfolio loss distributions
The impact of a stress scenario of default events on the loss distribution of a credit portfolio can be assessed by determining the loss distribution conditional on these events. While it is conceptually easy to estimate…
Vocal Bursts Valence Prediction